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ETS phase IV (2021-2030): crossing the finish line

On Wednesday, 22 November, the COREPER gave its agreement to the provisional deal reached by the Council and the European Parliament on the ETS reform for 2021-2030.

This green light puts an end to over two years of debates, although the two institutions will still have to formally endorse the final text.

The deal shows several steps in the right direction compared to the initial proposal from July 2015. Most importantly, it brings regulatory certainty to investors for the decade to come. It delivers on the ambition to bolster the ETS as the cornerstone of EU climate policy and strengthen the carbon price.

Striking the rightbalance between emission reduction and competitiveness was a complex and delicate task. AmCham EU regrets that the agreement comes at the expense of the protection of industry against carbon and investment leakage:

The flexibility mechanism is only at 3% while 5% seemed more appropriate;

The Innovation Fund will be mostly funded with free allowances rather than auctioned ones;

There is a serious risk that the cross-sectoral correction factor (CSCF) would be triggered, penalising all sectors including the best performers;

No real progress has been made on the compensation of indirect costs, which represent a significant share of ETS-related costs.

AmCham EU nevertheless applauds the determination of MEP Julie Girling and Adina-Ioana Valean (ENVI Chair), Commissioner Cañete and the Estonian Presidency, which was critical to deliver a compromise. We are committed to remain a constructive partner in the debate as work will start on secondary legislation (carbon leakage list, benchmarks and qualitative assessment) which is also essential to investors’ certainty.

As the EU continues to discuss major pieces of its energy and climate policy under the Clean Energy Package, visibility and consistency will be key for investors and new policies should not undermine the progress made in the ETS reform today.

If you have any questions on ETS or EU climate policy, please contact Stéphanie Brochard (sbr@amchameu.eu).